Take into consideration rising and falling values: tips for buying off-the-plan

All purchasers must define their own needs. Owner-occupiers are different to investors and want very different things from property. Investors who purchase off-the-plan should be buying for the medium- to long-term.

“Buying for the short-term is risky in the current environment. Look to holding a property for five to 10 years, and that will allow you to ride out any negative movements in the market that could reflect in the value of the property. If you stick with the long-term you will end up with solid capital growth,” says Tim Rees, director of CBRE residential projects.

Investors, who accounted for about 70% of sales six years ago, once dominated buying off-the-plan. But the tide is turning.

Rees says that owner-occupiers have become shrewd in buying property off the plan in recent years, and that purchases off-the-plan have become popular.

The tight residential market in Sydney, where owner-occupiers have seemingly embraced buying off-the-plan or face never getting started on the property ladder, has driven this, Rees says.

“In Sydney there are not many apartment buildings these days that are not already sold when they are finished, so they do not add anything to the available housing stock.

“This keeps the market competitive and tight, and owners-occupiers understand that buying off-the-plan is a reputable way to buy and no longer the domain of investors,” Rees says.

However, do not always assume that property prices are going to rise. There have also been cases of people paying far more for a property at settlement than they could hope to sell it for in the current market.

When you are considering what might happen to property prices from the time you sign the contract to settlement, you should also research what other projects will be completed over this time frame in the same area.

There could, for example, be a glut of apartments being marketed off-the-plan or due to commence construction, which could create an oversupply rental situation or reduce values.

For great tips on buying off the plan, download Property Observer’s free ebook – 14 tips for buying off the plan: The 2013 guide for investors and owner-occupiers.